The buy to let property market has received a startling amount of interest. Our obsession with all things property has grabbed the attention of many consumers.

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  • But if you are contemplating making the leap into buy to let and becoming a landlord, where do you start and how do you maximise the potential returns on your property investment?


    Playing the buy to let game is a serious business and you should plan ahead thoroughly before diving in at the deep end. It's essential that you consult the professionals in the fields of legal, financial, tax and property management matters for advice and guidance before you start your journey. You can then start planning with your eyes wide open and hopefully prevent any unforeseen problems arising further down the line.

    How will you finance the purchase?

    This is one of the biggest questions to consider at this stage, particularly given the size of the purchase and the nature of the investment. You should consider not only the upfront cost of the property itself, but also the fees involved in the purchase, developing costs and the ongoing maintenance of the property in the long term.

    Buy to let mortgages

    The most common way of buying a property to let is to arrange a dedicated buy to let mortgage. There are plenty of mortgages available from buy to let lenders, all designed to ride the waves of short to mid term changes in rental sector demand. Remember, buy to let mortgages tend to be more expensive than traditional mortgages, with the majority of lenders demanding a much bigger deposit than with a standard mortgage. This is normally a minimum of 15 per cent of the property value (although many can ask for up to 30 per cent).

    Additional costs of buy to let property

    But it's not just the cost of the deposit and the mortgage repayments that you need to think about. There are numerous other costs to factor into your calculations, such as:

    • Stamp Duty
    • Legal fees
    • Surveys
    • Income Tax (on the rental profits you make)
    • Capital Gains Tax (if you sell the property)
    • Mortgage repayments (if the property is ever empty)
    • Landlord insurance
    • Maintenance and repair costs
    • Furnishing expenses (if the property is to be furnished)
    • Letting and managing agent fees

    Budget carefully and be satisfied that you can cover all of these expenses comfortably before you begin your buy-to-let journey for real.

    Research your market

    It may sound obvious, but it's essential you do your homework and thoroughly research the market, from potential locations, to your target market, to the kind of properties you think might offer you the best return for your money. Visit the local estate agents to discuss the rental hotspots in the area, where the demand is coming from and the kind of properties that are easily let out to tenants. You can search for an estate agent right now on PrimeLocation. You can also employ a property search agent to find a property on your behalf to help you maximise the chances of success.

    Search for different types of property to rent in particular areas on PrimeLocation and see what the market rates are and how they compare with other properties in other locations. This should help you understand the potential return on the kind of investment you plan to make and where best to search for a property to buy.

    'Location, location, location'

    The location of the property is critical in determining the success of your buy to let adventure. Consider the proximity to the local amenities, such as schools, transport links, shopping centres, restaurants and parks. Are these amenities important to the tenants you hope to attract? If you identify young professionals as your target market, they are likely to be interested in being close to the local tube or train station and this may influence their decision to rent certain properties. Get it wrong and your property could lie empty for long periods and present a potentially precarious situation financially.

    Who is your target market?

    Identifying your target market will help you decide the kind of property you should be buying and the locations you should consider. Are they families, students, young professionals or corporate tenants? Again, check with estate agents who understand the local market and may already have a database of potential tenants who are looking for property to rent in the area. Identify where the demand is coming from and understand if that demand is being realised in the current market. You may find that there is a significant opportunity in the market to attract a certain type of tenant to a property in your area.

    What kind of property is best?

    A house, flat, cottage, bungalow or studio apartment? Newly-built or re-sale? Much will depend on your target market and your budget. But once you have a firm idea of who you're looking to attract, you need to invest in the kind of property most suited to these tenants. If you identify young families as your target market, then you may need to invest in a two or three bedroom house with a garden, close to the local schools.

    Whatever your target market might be, make sure the property you buy is equipped with the features expected by this audience. Bear in mind that older period properties, although attractive, may be higher maintenance than newer properties. It all depends on the local market - if period properties to rent are in high demand in the area, it may be worth while putting up with the extra work if it means the property will be continually occupied.

    Read our how to buy a house guide for information and advice on the property buying process.

    Being a landlord

    Being a landlord is a huge commitment and a serious responsibility. You should research your future role well in advance and make sure you are comfortable with the implications and the risks as well as the potential rewards. Before you can let your property, you will need to undertake the following tasks:

    • Notify the relevant parties of your intention to let the property, such as the mortgage company (if required) and the freeholder (if you have one).
    • Thoroughly prepare the property for letting.
    • Smarten up the interior and exterior of the property to meet tenant expectations and to maximise the potential rental price.
    • Make sure that the property and furniture meet the required safety standards.
    • Obtain adequate landlord insurance.

    For more detailed information, read our dedicated guide to being a landlord, or you can also get yourself up to speed on tenant and landlord rights.

    Finding your tenants

    Once you've secured the right property in the most appropriate location, it's time to find your tenants. You should never underestimate the work involved in attracting the right tenants and achieving the right price.

    The vast majority of landlords, particularly first time landlords, instruct a dedicated and qualified letting agent. This cuts out all of the necessary awkwardness of having to deal directly with viewings and negotiating with potential tenants. A good letting agent takes away a lot of the hassle and will provide the following services:

    • Advertise your property efficiently to thousands of potential tenants looking for property to rent in the area (make sure you choose an agent which lists its properties on a major portal, like PrimeLocation).
    • Have knowledge of the local market, including the type of properties to rent in the area, the potential demand for them, rental prices being achieved and the kind of tenants that might be interested in your property
    • Manage and conduct viewings.
    • Negotiate with tenants on your behalf when discussing the rental price of the property.
    • Provide advice and guidance throughout the process.
    • Vet potential tenants by sourcing references from previous landlords, conducting credit checks and obtaining bank details.
    • Organise tenancy agreements and inventories.
    • Manage the start and end to the tenancy based on your instructions.
    • Organise the collection of rent from the tenants, transfer the funds to you and arrange for repairs during the tenancy.
    • Inspect the property periodically on your behalf for its condition and state.
    • Provide professional advice and guidance throughout the tenancy period.

    For an additional fee, some letting agents will also vet potential tenants and organise the inventory and tenancy agreement on your behalf. Make sure you understand what you are paying for when you instruct a letting agent and what you will get in return.

    Get more information in our guide to choosing a letting agent, or you can find a letting agent in your area on PrimeLocation right now.

    Instructing a property management agent

    After you've found suitable tenants for your property, you have the option of either managing the let yourself, or hiring the services of a managing agent to work on your behalf.

    Much will depend on your circumstances. If you are living abroad, you may want to employ a managing agent to make sure your tenants and the property are sufficiently looked after while you're away.

    The majority of letting agents also offer property management services. If this is an option you're interested in, consult the letting agent first to make sure they can offer this service.

    Tax implications

    Being a buy to let property owner will bring new tax implications and you should make sure you fully understand them by seeking the appropriate professional advice.

    Income Tax

    Make sure you inform Customs & Revenue of your venture and the details of the rental income you are receiving. If you find that your total income for the tax year exceeds your personal allowance, you may have to pay tax. However, the costs associated with the buy to let property, such as mortgage interest payments, property management costs and the cost of repairs can be offset against your rental income in order to reduce your tax payment to the minimum.

    Capital Gains Tax

    Should you decide to sell the property, you may be liable to pay Capital Gains Tax on any profit you make. The changes made to Capital Gains Tax by the chancellor are likely to have a positive impact on the buy to let residential property market, which, in turn, underpins the housing market overall. 

    Inheritance Tax

    Should you decide to leave your property to anyone after your death, they may be liable to pay Inheritance Tax, depending on the value of your whole estate and your own personal circumstances. Seek professional advice to understand your position regarding all of these situations.

    Plan for the long term

    Whichever way you look at it, a buy to let investment should be a long term one. Make sure you have enough money put away to cope with any unforeseen repairs and maintenance costs that arise. You should also have funds in store to cover mortgage repayments throughout any periods where the property is empty.

    With appropriate financial planning, you should be able to weather the storm of short term fluctuations in the property market and increase your chances of making your venture successful in the long term. So, with the right choice of property, in the right location and with the very best available advice, a future in buy to let can be extremely rewarding.

    Related information

    Some information contained herein may have changed since it was first published. PrimeLocation strongly advises you to seek current legal and/or financial advice from a qualified professional.

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